Why W&T Offshore Stock Is Sinking Today
What happened
Shares of W&T Offshore (NYSE: WTI) had slumped nearly 10% by 11 a.m. ET on Wednesday. Weighing on the offshore oil producer was its fourth-quarter results and some weakness in oil prices.
So what
Overall, W&T Offshore reported solid fourth-quarter results. Both revenue and its adjusted earnings were above the analysts' consensus estimate. That's partly due to its better-than-expected production, which rose 7% year over year and was above the midpoint of its guidance range.
That strong showing enabled W&T Offshore to generate $22.5 million in free cash flow for the quarter, pushing its full-year total to $90.9 million. The oil company used those funds to pay off $96.5 million of debt last year, pushing its total down to $485.1 million by year-end.
Along with higher oil prices, that stronger financial position has put the company in the position to hit the accelerator. It recently closed $30.2 million of acquisitions, and it plans to increase capital spending to a range of $70 million to $90 million to drill four new wells this year. It's also evaluating other investment opportunities.
Image source: Getty Images.
While this investment ramp is coming amid surging oil prices, crude did cool off today. WTI, the primary U.S. oil price benchmark, tumbled about 5% to below $118 a barrel, pulling back from a nearly 14-year high, as the market continues to assess the banning of Russian oil imports by the U.S.
Now what
W&T has benefited from the rise in oil prices over the past year. That gave the company more cash to repay debt, putting it in the position to ramp up its investment spending. But with oil prices cooling off today, that's weighing on the stock, especially given its plan to accelerate its investments this year. If oil prices continue to fall, they will likely take W&T Offshore's stock down with them.
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Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
